Amazon’s e-book war escalates

By Thad RueterSenior Editor

The e-retailer released a letter over the weekend via its ReadersUnited.com web site arguing that it is fighting to keep the prices of electronic books low in its dispute with publisher Hachette. A group called Authors United responded with a letter calling on Amazon to protect authors’ interests.

New dueling letters and Amazon.com Inc.’s misquote of 20th-century English novelist, journalist and essayist George Orwell mark the latest round of the e-retailer’s ongoing dispute with publisher Hachette Book Group over e-book book prices.

Amazon, No. 1 in the Internet Retailer Top 500 Guide, released a letter online via its ReadersUnited.com site that reaches back some 80 years in publishing history to make its case that it should be allowed to sell digital versions of books for lower prices. The unsigned letter argues against the “unjustifiably high prices” for some e-books that are sold for $14.99 or “even $19.99.”

The letter, originated from the “Amazon Books Team,” goes on to say that “with an e-book, there's no printing, no over-printing, no need to forecast, no returns, no lost sales due to out of stock, no warehousing costs, no transportation costs, and there is no secondary market—e-books cannot be resold as used books. E-books can and should be less expensive.”

A day after Amazon released its letter, an opposing letter appeared as a two-page ad in the Sunday edition of The New York Times. That message, from a group of more than 900 writers operating under the “Authors United” umbrella, states that “we feel strongly that no bookseller should block the sale of books or otherwise prevent or discourage customers from ordering or receiving the books they want.” Amazon has delayed shipments of Hachette titles and prevented pre-orders of some of the publisher’s books. The authors’ letter offers little in terms of specifics about how to resolve the dispute; the writers who signed the document say they while they are not “taking sides on the contractual dispute between Hachette and Amazon, we encourage Amazon in the strongest possible terms to stop harming the livelihood of the authors on whom it has built its business. We call on Amazon to resolve its dispute with Hachette without further hurting authors and without blocking or otherwise delaying the sale of books to its customers.”

Both the authors’ and the Amazon letters encourage consumers to reach out to appropriate executives. The authors’ letter provides the e-mail address for Amazon CEO Jeff Bezos while Amazon’s letter includes the e-mail address for Hachette CEO Michael Pietsch.

Pietsch released his own statement in response to the e-mails he has received via the Amazon letter. He denies that Hachette “colludes” with anyone in setting book prices and says that “80% of the e-books we publish are priced at $9.99 or lower.” He adds that those e-books priced higher are less than “half the price of their print versions” and that “those higher-priced e-books will have lower prices soon, when the paperback version is published.”

He defends the prices Hachette charges by saying that “publishers invest heavily in books, often for years, before we see any revenue.” He acknowledges that e-books might not carry manufacturing, warehousing or shipping costs, but that Hachette still has to pay for advances, editing, design and marketing for its titles. Meanwhile, Amazon may have harmed its cause by quoting Orwell in a way that appears to be misleading.

To bolster its case, Amazon employs a passage from Orwell focusing on the worries of publishers in the 1930s that the spread of cheaper paperbacks would cut into their revenues for pricier books. Amazon in its letter strives to make the point that publishers have long experience keeping prices higher than needed for the reading public in order to protect profits. Amazon attempts to bolster its case through Orwell, whom, the e-retailer claims, came out in favor of publishers working together to keep book prices high.

Amazon’s letter states: “The famous author George Orwell came out publicly and said about the new paperback format, if ‘publishers had any sense, they would combine against them and suppress them.’ Yes, George Orwell was suggesting collusion.”

It’s hard to draw that conclusion when looking at Orwell’s entire quote. The point Orwell was trying to make was basically the opposite of what the Amazon letter states. Orwell, in fact, was in favor of paperbacks and his fuller passage displays a more subtle, ironic point about what cheaper books would mean to publishers and readers.

The fuller Orwell passage, from The New English Weekly on March 5, 1936, focused on Penguin paperbacks and reads: “The Penguin Books are splendid value for sixpence, so splendid that if the other publishers had any sense they would combine against them and suppress them.” He goes on to say that consumers might buy three cheaper books rather than two costlier ones and perhaps use the savings “on seats at the ‘movies.’” He continues: “Hence the cheaper books become, the less money is spent on books. This is an advantage from the reader’s point of view and doesn’t hurt trade as a whole, but for the publisher, the compositor, the author and the bookseller, it is a disaster.”

Amazon did not immediately respond to a request for comment this morning about its mangling of the Orwell passage.

The Amazon letter released Saturday also says that “Hachette has already been caught illegally colluding with its competitors to raise e-book prices.” Hachette and other publishers in 2012 settled an antitrust case with the U.S. Department of Justice that alleged e-book price-fixing by publishers. The publishers were required to pay a total of $69 million to cover refunds to consumers.

The Amazon letter also puts e-books into the context of modern media, including social networks, news sites and mobile games, to make the point that books don’t compete only against other books but other forms of digital communication, and hence require lower pricing. “If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive,” the letter states.